Tower Records to iTunes, NARM seeks revival

Jim Donio has had to wave goodbye to Tower Records and Borders, but can the National Association of Recording Merchandisers help music retailers navigate uncertainty of digital age?

Bill Wilson (left) and Jim Donio, are trying to build a trade group that can help online and offline music retailers flourish. Greg Sandoval/CNET

Oh please, don't try to take Jim Donio down memory lane again.

During an interview with Donio, president of the National Association of Recording Merchandisers (NARM), I wanted to reminisce about buying the Clash's "London Calling" at the Tower Records store on Sunset Boulevard or discovering Caetano Veloso at the Virgin Megastore on San Francisco's Market Street. Donio smiled politely.

Just as there was all of this furor over what's going to happen with digital music, we were also dealing with the biggest sales period of all time with Britney Spears, 'N Sync and the Backstreet Boys. People were collecting money hand over fist."
--Jim Donio, NARM president

He well knows that in addition to owning property in some of America's most fashionable neighborhoods, traditional record stores once commanded prime real estate in the hearts of the country's most-devoted music fans. But those days are gone. Scores of record stores have shut their doors. Music has shed much of its physical presence and thrives now mostly on the Web. That's where Donio knows NARM must be more influential.

NARM is a 53-year-old trade group in the unique position of representing anyone with a stake in selling music. Amazon, Rdio, and Apple's iTunes are members. Spotify has discussed joining. The big box stores Best Buy and Target are in, as are Microsoft, Verizon, and Nokia. On Wednesday, NARM announced that it had added five new board members, three of which are execs from Microsoft, eMusic, and Rhapsody.

When NARM's members gather, tech companies sit elbow-to-elbow with operators of mom-and-pop physical stores, such as Waterloo Records from Austin and 52.5 Records from Charleston, S.C. Incidentally, you can find 52.5's Web site at Corporaterocksucks.com.

Most traditional music merchants were hit hard by Internet distribution and online piracy. A decade after Napster, the sector remains in shambles. CD sales are dying . Web retailers haven't fared much better. Apple's iTunes is the No. 1 music store in the land and the service makes more money on music players than selling songs.

Industry-wide music sales are less than half of what they were in 2000.

And now here comes the cloud. For merchants, that means storing and managing a customer's music library on their servers instead of asking customers to complete those chores with his or her own PC. For some NARM members, this could bring even more change.

Aisle end-caps to databases
Donio's goal is to help online and offline music retailers navigate all this uncertainty.

Two years ago, he hired Bill Wilson, a former music-business entrepreneur, as NARM's digital strategist. Together, the men are trying to solve some of the problems facing members, such as improving metadata, accurately counting song plays, and helping smaller retailers ingest large digital catalogs.

When information is stored on digital music files, it frequently is inconsistent and this could make it hard for customers to find what they want. Some songs may be filed under Sean Combs, others under Puff Daddy or P-Diddy, though they're all different names for the same artist. Wilson and Donio have built a database they say eliminates many of the inconsistencies.

The two men also started a seminar to offer pointers to budding music entrepreneurs, as well as help spark interest in music retailing.

"App developers are really the new mom-and-pops," Wilson said. "These are independently minded folks who are building apps in their rooms and are investing in all these new ideas. They aren't experienced in the business but are following that same sort of drive and passion for music that Ahmet Ertegun did when he founded Atlantic Records. In the old days, that meant starting a label. Now it means building an app."

Databases are a long way from end-cap displays and in-store promotions, the kind of nuts-and-bolts retailing that traditional music merchants once worried about. Some in the industry, though, say NARM was too slow to react to the Web and as a result lost some of its prestige and influence.

NARM's annual conferences were for a long time can't-miss events for the music industry. These were extravaganzas, fitting of a sector known for over-the-top partying and profligacy. They showed off in a flamboyant way the vital position retailers once held in the business.

In the shadow of the Apple store on San Francisco's Market street, the Virgin Megastore prepares to shut down in 2009. Greg Sandoval

One year, attendees were greeted to a rollicking event by an ice sculpture carved in the shape of Madonna. Attendees would sip champagne that had flowed down from the frozen likeness of the material girl's cleavage. Another time, attendees were encouraged to dress up in heavily padded suits and sumo-wrestle with David Hasselhoff, he of "Baywatch" and German pop-music fame.

The number of attendees to NARM's conferences would top 3,000. Last year, the number was down to 1,000, Donio said. The group's annual budget for 2003 was somewhere around $2.8 million, according to Billboard magazine. The budget now is $1.8 million.

Casting a smaller shadow
If NARM is less influential, if the group is more diminished than it once was, the same can be said of the entire recording industry. Not only did Napster, the iconic file-sharing service, kick off illegal file-sharing, but it proved consumers wanted to acquire songs via the Web. Thus, Napster paved the way for iTunes and other legal Web stores that remade traditional music sales.

"App developers are really the new mom-and-pops."
--Bill Wilson, NARM strategist

This fomented a lot of distrust among traditional music merchants for their online counterparts in addition to triggering infighting among NARM members.

In 1999, when Sony Music began embedding links in CDs, which once the discs were loaded into computers, would steer buyers to Sony's online music stores, NARM filed suit. Retailers didn't want labels becoming retailers. They were outraged that they were selling music for Sony, and then Sony tried to abscond with their customers when it came to the Web, Donio said.

The suit was eventually dropped, but it was reflective of how Donio was in charge of a group where many of the members had dramatically competing interests.

"It was a very bad time," Donio said. "There was a lot of yelling."

Related links
• What's driving rise in music sales?
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• Scoop: RIM in talks for BlackBerry music service

As to the criticism that traditional retailers were too slow to adapt, Donio remembers that it was easy 10 years ago for the entire recording industry to be lulled into a false sense of security.

"Just as there was all of this furor over what's going to happen with digital music," Donio recalled, "we were also dealing with the biggest sales period of all time with Britney Spears, 'N Sync, and the Backstreet Boys. People were collecting money hand over fist."

Turn the clock forward. Donio is much happier to discuss how sales appear to be inching up again.

Research firm Nielsen SoundScan announced that the industry posted a 1 percent increase in overall U.S. album sales for the first six months of the year, snapping a dismal seven-year run of sales declines. He says he doesn't know if the uptick is a blip and he knows that everybody from music retailers to the labels to handset makers and ISPs still face challenges but he thinks NARM can help them work with one another.

"There's a critical mass of companies that aren't predominately selling physical product at NARM now," Donio said. "They have significant issues they want to discuss with trading partners. We can be Switzerland."

 

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